23 July 2019

Surging Home Prices

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Homebuyers are reeling from higher mortgage rates and home prices. As a result, total mortgage applications fell 2.5% from the previous week, according to the Mortgage Banker Association's (MBA) seasonally adjusted data for the week ending April 27.

Leading the decline, refinance applications fell 4%, while purchase applications dipped 2% from the previous week. The Refinance Index decreased 4% from the previous week, as refinancing activity is down to 36.5% of all applications from 37.2% the prior week. That's the lowest level since September 2008.

Meanwhile, mortgage rates jumped for 30-year fixed loans with conforming balances of $453,100 or less to 4.80% from 4.73%. Points (including origination fees) also increased to 0.53 from 0.49 for 80% loan-to-value ratio loans. Also, average 15-year fixed rates hit their highest level since February 2011, jumping to 4.21% from 4.13% the previous week, with points decreasing to 0.49 from 0.52.

As mortgage rates inch closer to 5% this year, skyrocketing home prices are adding another affordability barrier for many homebuyers. Home prices surged 7% nationally from March 2017 to March 2018, and price increased 1.4% from February 2018 to March 2018, according to the latest CoreLogic Home Price Index and HPI Forecast.

Rising home prices – and the dire shortage of homes on the market – show no signs of abating. The national home price index is estimated to jump 5.2% from March 2018 to March 2019, CoreLogic predicts. While a smaller 0.1% gain in home prices is expected from March 2018 to April 2018, that is little comfort to cash-strapped homebuyers who will bear the brunt of higher housing and mortgage costs.

"Home prices grew briskly in the first quarter of 2018," said Dr. Frank Nothaft, CoreLogic's chief economist, in a news release. "High demand and limited supply have pushed home prices above where they were in early 2006. New construction still lags historically normal levels, keeping upward pressure on prices."

Click here for the original article from Investopedia.

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